SALES 1

CIVIL LAW REVIEWER

SALES
CHAPTER 1: INTRODUCTION
CONTRACT OF SALE One of the contracting parties obligates himself
to transfer the ownership of and to deliver a determinate thing, and
the other to pay therefor a price certain money or its equivalent. A
contract of sale may be absolute or conditional.
SALES
1. Contract of sale (absolute)
real obligation obligation to give
remedies available:
a. specific performance
b. rescission
c. damages
2. Contract to sell (conditional)
personal obligation obligation to do
remedies available:
a. resolution
b. damages
ESSENTIAL REQUISITES
1. consent
2. subject matter
3. price

OF

A CONTRACT

OF

SALE

CHARACTERISTICS OF CONTRACT OF SALE:

1. Nominate - law gave it a name
2. Principal - can stand on its own; unlike accessory contract
3. Bilateral - imposes obligation on both parties
a. obligation of seller transfer ownership & deliver
b. obligation of buyer pay for price
Consequence: power to rescind is implied in bilateral contracts
4. Onerous with valuable consideration
Consequence:
all doubts in construing contract to be
resolved in greater reciprocity of interest
5. Commutative equal value is exchanged for equal value
Test: subjective as long as parties in all honesty that he is
receiving equal value then it complies with test & would not
be deemed a donation; but must not be absurd.

MEMORY AID

Inadequacy of price or aleatory character not sufficient

ground to cancel contract of sale; inadequacy can show
vitiation of consent & sale may be annulled based on vice
but not on inadequacy
6. Consensual meeting of minds makes a perfect contract of sale
but needs delivery to consummate.
7. Title & not a mode gives rise to an obligation to transfer; it is
delivery w/c actually transfer ownership; mode which actually
transfer ownership.
STAGES IN LIFE OF CONTRACT OF SALE:
1. negotiation
2. perfection by mere consent; performance may be demanded (
specific performance )
3. consummation
DISTINGUISHED FROM OTHER CONTRACTS:
1. Donation
donation is gratuitous; sale is onerous
donation is formal contract; sale is consensual
donation is governed by law on donation; sale is governed
by law on sales
2. Barter
in barter, the consideration is the giving of a thing; in sale, it
is giving of money as payment
both are governed by law on sales; both are species of the
genus sales
if consideration consists party in money & partly by thing
look at manifest intention; if intention is not clear (1468 ):
a. value of thing is equal or less than amount of money
sale
b. value of thing is more than amount of money barter
3. Contract for piece of work
test in article 1467:
a. contract for delivery of an article which the vendor in the
ordinary course of business manufactures or procures for
general market ( whether on hand or not ) sale
b. goods are to be manufactured specially for a customer
and upon special order and not for the general market
contract for piece of work.
jurisprudence:

SALES 2
a. Timing test under art 1467; Inchausti; whether the
thing transferred would have never existed but for the
order contract for piece of work (abandoned)
b. Habituality test enunciated in Celestino v CIR; contract
of sale if manufacturer engages in activity without need
to employ extraordinary skills and equipment; contract
for piece of work is sale of service; contract of sale is
sale of things.
c. Nature of the object test enunciated in EEI v CIR; each
products nature of execution differs from the others;
products are not ordinary products of manufacturer.
main factor in decision of the SC: essence of why parties
enter into it:
a. essence is object contract of sale
b. essence is service contract for piece of work
4. Agency to sell
in sale, buyer pays for price of object; in agency to sell,
agent not obliged to pay for price, merely obliged to deliver
price received from buyer.
in sale, buyer becomes owner of thing; in agency; principal
remains owner even if object delivered to him
in sale, seller warrants; in agency, agent assumes no
risk/liability as long as within authority given
in sale, not unilaterally revocable; in agency, may be
revoked unilaterally because fiduciary & even w/o ground
in sale, seller receives profit; in agency, agent not allowed to
profit
TEST: essential clauses of whole instrument ( art 1466
motherhood statement, not good law )
Agency is a personal contract; sale is real contract ( to give )
rescission not available in agency
5. Dacion en pago
dacion:
contract where property is alienated to
satisfy/extinguish obligation to pay debt
in dacion: novates creditor-debtor relationship into sellerbuyer
in dacion: delivery is required ( real contract )
6. Lease
in sale: obligation to absolutely transfer ownership of thing;
in lease: use of thing is for specified period only with
obligation to return

MEMORY AID

in sale: consideration is price; in lease: consideration is

rent
in sale: seller needs to be owner of thing to transfer
ownership; in lease: lessor need not be owner
lease with option to by: really a contract of sale but
designated as lease in name only; it is a safe by installments
CHAPTER 2: PARTIES TO A CONTRACT OF SALE

GENERAL RULE: All parties with capacity to contract can enter into a
valid contract of sale
1. Natural
2. Judicial - corporation/partnership/associations/Cooperatives
Status of contract valid
Remedies available therefore are:
a. specific performance
b. rescission
c. damages
EXCEPTION TO GENERAL RULE:
1. Minors
status of contract: voidable only, therefor ratifiable
remedy is action for annulment (with partial restitution in so
far as the minor is benefited)
2. SALE BY & BETWEEN SPOUSES
a. Contract with 3rd parties
status of contract is valid
b. Sale between parties
Status not provided for by law but VOID according to
case law
Reason:
i. prevent defraudation of creditors
ii. avoid situation where dominant spouse take
advantage of others
iii. avoid circumvention on prohibition of donation
between spouses
Exception
i. separation of property agreed (marriage settlement)
ii. judicial separation of property
c. Common Law Spouses (Paramours)
Status of contract: VOID (per case law)
Rationale: evil sought to be avoided is present

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3. OTHERS PER SPECIFIC PROVISIONS OF LAW
a. Guardian with regards to property of ward during period of
guardianship
b. Agent with regards to property of principal
c. Executor/administrator with regards to the estate of the
deceased
d. Public officers with regards to the property of the estate
e. Officer of court & employee with regards to property in
litigation
LEGAL STATUS OF CONTRACT:
1. VOID (PER CASE LAW) guardian/ executor/public officers /
officers of the court
2. VOIDABLE (PER CIVIL CODE) agent; and if with consent, VALID
TWO GROUPS OF PROHIBITED PARTIES FROM ENGAGING IN CONTRACT OF SALE:
1. Guardian / Agent / Executors ratifiable in the sense that only
private wrong is involved
2. Public Officials / Officers of Court not ratifiable in the sense
that public wrong is concerned
GUARDIAN/AGENT/ADMINISTRATOR
1. Legal status of contract: VOID (case law)
2. Direct or indirect
3. If mediator no need to prove collusion; inutile
4. Even if court approved sale
5. Reason: fiduciary relationship is based on trust
ATTORNEYS
REQUISITES:
1. Lawyer-client relationship exists
2. Subject matter property in litigation (all types)
3. Duration while in litigation (from filing of complaint to final
judgment); may be future litigation
Reason: due to public policy; ground for mal practice
a. Client is at the mercy of the lawyer
b. Law is a noble profession
c. 2 Masters 2 interest; one cannot serve 2 masters at the
same time
Exception: CONTINGENT FEE ARRANGEMENT
a. Amount of legal fees is based on a value of property
b. Property itself is involved
Not a sale but service contract

MEMORY AID

I give that you may do (innominate contract) so has to

be governed by law on sales but because of public
policy, considered VALID
Reason why contingent fee is followed:
i. constitutional prohibition v impairment of contract
ii. subject to control of courts (may be reduced if
unconscionable or nullified)
iii. canons of legal ethics
iv. higher public policy litigants
CHAPTER 3: SUBJECT MATTER OF SALE

TO BE A VALID & BINDING SUBJECT MATTER,

1. Existing, Future & Contingent
2. Licit
3. Determinate or determinable

THE

FOLLOWING

MUST

CONCUR:

EXISTING, FUTURE, CONTINGENT

Refers to subject matter that are existing & not existing but
capable of existence (pursuant to present, technology)
1. if this is present, status of contract: VALID
2. if absent : NO CONTRACT SITUATION, THEREFORE NO CAUSE OF
ACTION
3. if mere pipe dream : VOID
a.
SALE OF THINGS HAVING POTENTIAL EXISTENCE (Emptio
Rei Speratae)
Sale of future things; no physical existence yet
A resolutory condition that thing will come into existence
Non happening of condition: RESULUTORY: EXTINGUISH
THE CONTRACT
Remedy: can recover what has been paid
b. SALE OF HOPE (Emptio Spei)
Every sale of future thing is subject to condition that
they will come into existence
If hope does not come true NO RECOVERY OF
PAYMENT/NO RESCISSION
Aleatory character but valid
LICIT & VENDOR MUST HAVE A RIGHT TO TRANSFER SUBJECT MATTER
1. LICIT must be within the commerce of men
VOID SUBJECT MATTER:
a. Contrary to law

SALES 4
b. Simulated/fictitious
c. Did not exist at a time of transaction
d. Outside commerce of men
e. Impossible service
f. Intention can not be ascertained
g. By provision of law
2. SELLER MUST BE OWNER only at a time of consummation
since tradition transfers ownership but to have a perfected
contract of sale, Vendor need not be owner of thing; can be
validated/ratified by subsequent acquisition of title by seller
DETERMINATE & DETERMINABLE
Absence: VOID; there is subject matter but Intention regarding
subject matter can not be ascertained VOID
Kinds of subject matter:
1. Specific - Determinate
Particularly designated or segregated from all others of
the same class
2. Generic - Determinable
Test: reach a point of description where both minds
concur
At the time the contract is entered in to the thing is
capable of being made determinate without the
necessity of a new or further agreement between parties
Exact quantity not essential
Sale of generic things VALID; still executory
There can only be contract of sale when subject is finally
chosen for delivery already segregated or designated;
but before designation, valid K of sale already exists
3. Undivided interest (BUYER becomes co-owner)
4. Undivided share in mass of fungible goods (BUYER becomes
co-owner)
CHARTER 4: PRICE signifies the sum stipulated as
equivalent of the thing sold
CHARACTERISTICS OF VALID PRICE
1.
Must be real
2.
Must be in money or its equivalent
3.
Must be certain or ascertainable at the time of the
perfection of the contract
4.
Manner of payment provided for

MEMORY AID
REAL
1. When price stated is one intended by parties
If fictitious: no intention with respect to price - VOID
If False/simulated: what appears in contract is not the true
price
a. VALID if there is true consideration
b. VOID but if none (because it is fictitious)
2. Valuable
When not valuable VOID
When contract is onerous, presumed to have valuable
consideration
Nominal consideration w/c is common law concept does not
apply (P1.00)
Gross inadequacy of price in ordinary sale does not render
contract void unless it is shocking to conscience of man.
Except:
a. Judicial sale
Shocking to conscience of man
Higher price can be obtained at re-sale
b. Rescissible contracts due to lesion
c. Sales with right to repurchase (raises presumption of
equitable mortgage) Remedy is reformation
CERTAIN OR ASCERTAINABLE
CERTAIN
1.
Sufficient that it is fixed with reference to another thing
certain
That thing will have on a definite day, or in a particular
exchange or market, or when an amount is fixed above or
below the price on such day, or in such exchange or market
provided said amount be certain
2.

Determination be left to judgment of specified person/s

If contract states that price is to be determined by 3 rd party,
contract is already perfected (there is just a suspensive
condition actual fixing of price)
3rd party fixes price in bad faith or mistake court remedy
can be made
3rd party is unable or unwilling to fix price parties have no
cause of action
Reason:

SALES 5

a. suspensive condition does not happen yet courts have

no jurisdiction
b. enforceable contract have not yet arisen court with no
jurisdiction to create contract between parties
Result: INEFFICACIOUS
When price can not be determined in accordance with any
of the preceding rules, contract of sale in INEFFICACIOUS
However, when SM delivered, BUYER must pay reasonable
rice therefore court can fix price

MANNER OF PAYMENT MUST BE AGREED UPON

Deemed to be an essential requisite because it is part of the
presentation of the contract
Integral part of concept of price
If there is failure to meet minds as regards term of payment:
CASH BASIS
Must be certain or at least ascertainable
Effect is absent: NO CONTRACT SITUATION
CHAPTER 5: FORMATION OF CONTRACT OF SALE
3 STAGES IN LIFE OF A CONTRACT OF SALE
1. Policitacion/negotiation Stage offer is floated, acceptance is
floated but they do not meet; time parties indicate their interest
but no concurrence of offer & acceptance
2. Perfection concurrence of all requisites; meeting of the minds
3. Consummation parties perform their respective undertakings
POLITIACION
1. offer is floated but not absolute
2. acceptance is likewise floated but conditional
RULES:
1. offer is floated prior to acceptance, may be withdrawn at will
by offeror
2. offer floated with a period without acceptance, extinguished
when period has ended & maybe withdrawn at will by offeror;
right to withdrawn must not be arbitrary otherwise, liable to
damage under Art 19, 20, 21 of civil code
3. offer floated with a condition extinguished by happening/nonhappening of condition

MEMORY AID

4. offer floated without period/without condition continues to be

valid depending upon circumstances of time, place & person
5. offer is floated & there is counter-offer original offer is
destroyed, there is a new offer; can not go back to original offer
6. offer is floated no authority of offeror to modify offer
7. offer is accepted absolutely proceed to perfected stage
OPTION CONTRACT
floats in the policitacion stage
offer with a period but founded upon a separate consideration
distinct from the price
no presumption of consideration, needs to be proven
Characteristics:
a. not the contract of sale by itself, distinct
b. nominate
c. principal; but can be attached to other principal contracts
d. onerous
e. commutative
f. unilateral vs contract of sale which is bilateral
to be perfected & give rise to action, the following must concur
a. subject matter of sale must be agreed upon
b. price of sale & manner of payment must be agreed upon
c. consideration separate & distinct from price
d. period as per contract; if period not provided prescribes
in 10 years (written contract)
e. how
exercised:
notice
of
acceptance
should
be
communicative to offeror without actual payment as long as
there is delivery of payment in consummation stage
2 SITUATIONS IN AN OPTION CONTRACT:
1. with separate consideration
Legal consequence:
a. option contract is valid
b. offeror can not withdrawn offer until after expiry period
c. subject to rescission, damages but not to specific
performance because this is not an obligation to give
2. without separate consideration
Legal consequence:
OLD RULE:
a. offer is still valid, but
b. option contract is void
c. not subject to rescission, damages

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NEW RULE: Right if first refusal recognized

MEMORY AID

a. anything that refers to price is material

b. small items are insignificant, does not make
acceptable unconditional
RIGHT OF FIRST REFUSAL:
when sale is subject to suspensive condition, no perfected
creates a promise to enter into a contract of sale and it has no
contract of sale yet; becomes perfected only upon happening of
separate consideration, not subject to specific performance
condition
because there is no contractual relationship here & it is not an
obligation to give (not a real contract)
In sales at auction, perfected when auctioneer announces its
perfection by the fall of the hammer or in other customary
New doctrine: may be subject to specific performance
manner may impose terms under bidder may retract his bid;
Effect of new doctrine: turned the world of policitacion upside
owner of property sold at auction may impose terms under w/c
down because while valid option contract is not subject to
the auction will proceed & it shall be binding w/n the bidders are
specific performance, right of first refusal which does not even
aware
have a separate consideration may be subject to specific
Place of perfection: where the meeting of minds happen; when
performance
acceptance sent by mail, perfection is deemed where the offer
is made
OPTION CONTRACT & RIGHT OF FIRST REFUSAL DISTINGUISHED
Performance has nothing to do with perfection stage
OPTION CONTRACT
RIGHT OF FIRST REFUSAL
Principal contract; stands on its own
Accessory; can not stand on its own
EARNEST MONEY
Needs separate consideration
Does not need separate consideration
money
Subject matter & price must be valid
There must be subject matter1.but
price given as part of purchase price
2. its acceptance is proof that contract of sale exists
not important
nothing in law prevents parties from treating earnest money
Not conditional
Conditional
differently
Not subject to specific performance
Subject to specific performance
old concept: subject to forfeiture when BUYER backs out
Recognizes recovery of damage based on abuse of rights
new concept: can not be forfeited part of purchase price;
doctrine
must be restored
PERFECTION: OFFER & ACCEPTANCE
qualification: if old concept is stipulated VALID
PERFECTION
presumption of perfection of contract of sale and such
Sale is a consensual contract, perfected by meeting of minds
earnest money as art of purchase price is disputable
regarding subject matter & price
Meeting of Minds:
FORM OF SALES
1. Form not important in validity of sale
1. Offer certain
2. Acceptance absolute
Sale being consensual, may be oral or written, perfected by
Qualified acceptance merely a counter-offer which
mere consent as to price & subject matter
needs to be absolutely accepted to give rise to perfected
If particular form is required under the statute of frauds:
contract of sale
a. valid & binding between parties
Business ads are mere invitations to make an offer
b. not binding to 3rd persons only
except when it appears to be otherwise
Reason: purposes of convenience only & not for validity &
Acceptance by letter/telegram binds only at time it
enforceability; cause of action is granted to sue & compel
other party to execute the document
came to knowledge of SELLER; prior thereto offer may
still be withdrawn
2. When form is important for validity; exception by specific
provision of law;
Must be exact terms to be considered absolute
When deviations allowed:

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a. power to sell a piece of land granted to an agent otherwise
VOID
b. sale of large cattle; must also be registered with Municipal
treasurer otherwise VOID
c. sale of land by non-Christian if not approved by Governor
VOID
3. When form is important for enforceability
(STATUTE OF
FRAUDS)
a. sale to be performed 1 year after
b. Agreement to sell things with value of 500 and up
c. Sale of real property or interest therein
Exception:
i. When there is a note or memorandum in writing &
subscribe by party or his agent (contains essential terms
of the contract)
ii. When there has been partial performance/execution
(seller delivers with intent to transfer title/receives price)
iii. when there has been failure to object to presentation of
evidence (oral)
(constitute waiver)

MEMORY AID

2.
3.
4.

CHAPTER 6: CONSUMMATION STAGE/PERFORMANCE STAGE

Stage where parties both comply with their obligation

Nature of diligence required: diligence of good father of family
unless other requirement is stipulated
Consequence: Seller will guilty of breach if thing is lost through
his fault

DELIVERY OF THE THING

Transfer ownership (tradicion) twin obligation:
1. transfer title(ownership) SELLER must be owner of thing at
the time of consummation to validly transfer title
2. delivery of the thing
Different kinds of delivery:
1. Actual
when thing sold is placed in the control & possession of
the buyer
2. Constructive
DIFFERENT FORMS OF CONSTRUCTIVE DELIVERY:
1. Traditio Longa Manu

5.

6.

Delivery of thing by mere agreement; when SELLER points

to the property without need of actually delivering
1. Traditio Brevi Manu
1.
Before contract of sale, the would be buyer was already
in possession of the would be subject matter of sale (ex: as
lessee)
Symbolic delivery
As to movables ex: delivery of the keys to a car
Constitutum possessarium
at the time of perfection of contract, seller continues to hols
possession merely as a holder
Execution:
Exception:
a. when there is stipulation to contrary, execution does not
produce effect of delivery
b. when at the time of execution of instrument, subject
matter was not subject to control of the seller
subject matter should be within control of seller; he
should have capacity to deliver at the time of
execution of public instrument when he wants to
effect actual delivery
such capacity should subsist for reasonable time
after execution of instrument (reason time depends
on circumstances of persons, places & things)
Effect when 2 requisites do not concur: no constructive
delivery; no compliance on part of SELLER to deliver
Even when thing is mortgaged, seller can still deliver
because naked title still belongs to him & can still do acts of
ownership including conveyance
Negotiable documents of title & non negotiable instruments
transferee acquires title of transferor
when delivered without negotiation, it is a mere assignment
Intangibles/ incorporeal property
through public instrument
execution is equivalent to delivery if from the deed, contrary
does not appear

DELIVERY OF FRUITS & ACCESSIONS/ ACCESSORIES

Right to fruits & accessions/accessories accrue from time sale is
perfected
but no real right over it until it is delivered

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DELIVERY THROUGH CARRIER
1. FAS FREE ALONG SIDE
When goods delivered alongside the ship, there is already
delivery to the buyer (twin effects deemed fulfilled)
2. FOB-FREE ON BOARD
a. Shipment when goods are delivered at ship at point of
shipment; delivery to carrier by placing goods on vessel is
delivery to buyer
b. Destination when goods reach the port even if not
disembarked yet from the vessel, there is delivery to the
buyer
3. CIF COST, INSURANCE, FREIGHT
a. when buyers pays for services of carrier delivery to carrier
is delivery to buyer; carrier is agent of the buyer
b. when buyer pays seller the price from moment the vessel
is at port of destination, there is already delivery to buyer.
COMPLETENESS OF DELIVERY
1. MOVABLES delivery of thing plus accessories & accessions in
the condition in which they were upon the perfection of the
contract including the fruits
a. LESS buyer has 2 options:
i. reject
ii. accept
(1) when accepts with knowledge that seller is not going
to perform contract in
full, he must pay at price
stipulated
(2) when accepts & consumes before knowledge that
buyer will both perform contract in full, liable only for
fair value of goods delivered
b. LARGER buyer has 2 options;
i. accepts per contract & reject the rest
ii. accept the whole pay price stipulated
iii. reject whole if subject matter is indivisible
c. MIXED WITH GOODS OF DIFFERENT DESCRIPTION buyer
has 2 options:
i. accepts good w/c are in accordance with contract &
reject the rest
ii. reject goods entirely if indivisible
2. IMMOVABLES
a. sold per unit or number
with statement of its area, rate at certain price
deliver all that may heave been stated in the contract

MEMORY AID

if impossible, remedies of buyer:

LESS IN AREA
i. rescission
ii. proportional reduction of price LACK IN AREA
SHLD NOT BE LESS THAN 1/10 OF AREA AGREED
UPON
GREATER IN AREA
i. accept per stipulation & reject the rest
ii. accept whole area pay at contract rate
Not applicable to judicial sales
b. sold for lump sum
When price per unit not indicated
Is area delivered is either greater or lesser price will
not be adjusted accordingly
TIME & PLACE OF DELIVERY
1. follow stipulation in contact, or
2. follow usage of trade, or
3. sellers place of business or his residence
4. specific goods place where the thing is
5. at reasonable hour
EFFECTS OF DELIVERY: Title to thing is transferred/ownership is
transferred
Except: contrary is stipulated as in the case of:
1. contract to sell
2. sale on acceptance/approval
3. sale or return
4. there is implied reservation of ownership
WHO BEARS EXPENSES OF DELIVERY Seller
Sale by description/sample
1. Sample goods must correspond with sample shown
2. Description goods must correspond with description or sample
Effect if there is no compliance: RESCISSION may be availed
of by the buyer
OBLIGATION OF BUYER
1. Pay the price
Buyer is obligated to pay price according to terms agreed
upon regarding time, place & amount

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If payment of interest is stipulated must pay; if amount of

interest not mentioned apply legal rate
When buyer defaults constitutes breach: subject to specific
performance/rescission & damages ; interest to be paid also
from of default
2. Accept delivery of thing sold
Where to accept: at time & place stipulated in the contract;
if none specified at the time & place of delivery
Goods; there is acceptance when:
a. He intimates to seller that he has accepted
b. When delivered & does any act inconsistent with
ownership of seller
c. Retains without intimating to seller that he has rejected
Sale of Goods on installment:
a. Goods must be delivered in full, except when stipulated
b. When not examined by buyer not accepted until
examined or at least had reasonable time to examine
Acceptance of goods in general, absent contrary express
stipulation, does not discharges seller from liability in case
of breach of warranties (unless no notice or failure to give it
within reasonable time)
When buyer has a right to refuse goods, no need to return;
shall be considered as depositary; unless there is stipulation
to contrary
DOUBLE SALE
General Rule: FIRST IN TIME, PRIORITY IN RIGHT
When does it apply: when not all requisites embodied in 1544
concur
SPECIAL RULE: 1544
Requisites;
1. exactly same subject matter
2. exactly same immediate seller
3. they buyers represent conflicting interest
4. both sales are valid
RULES ACCORDING TO 1544:
1. MOVABLE
owner is first to posses in good faith
2. IMMOVABLE
First to register in good faith

MEMORY AID

No inscription, first to possess in good faith

No inscription & no possession in good faith Person who
presents oldest title in good faith

GOOD FAITH
1. one who buys property without notice that another person has a
right or interest in such property
2. one who has paid price before notice that another has claim or
interest
lis pendens notice that subject matter is in litigation
adverse claim notice that somebody is claiming better
right
POSSESSION
Both actual or constructive
REGISTRATION
1. registered under Torrens system
1544 applies
2. not registered under the Torrens system
1544 still applies
decided case which excluded unregistered land dealt with
judicial sale whereby buyer acquires right of transferor;
outside of such situation must apply to conflicting sale
over same unregistered parcel of land
3. when situation is sale 1 deals with land when not yet registered
& sale 2 is done when land already registered apply FIRST IN
TIME, PRIORITY IN RIGHT
CHAPTER 7: DOCUMENTS OF TITLE
DOCUMENTS OF TITLE
not creations of law but by merchants to allow them to deal
with merchandise without having to physically carry them
around
pertains to specific type of movables only : GOODS
2 FUNCTIONS
1. evidence of existence & possession of goods described therein
2. medium by which seller is able to transfer possession of goods
2 FORMS

S A L E S 10
1. negotiable
a. deliver to bearer (negotiation by mere delivery)
b.
deliver to specific person or his order (negotiation by
endorsement + delivery)
even if face of instrument says NON-NEGOTIABLE it is
still NEGOTIABLE; limiting words not to destroy
negotiability
if order instrument & no endorsement was made
equivalent to assignment

MEMORY AID

CHAPTER 8: SALE BY NON-OWNER OR BY ONE HAVING

VOIDABLE TITLE

1. SALE BY NON-OWNER
Perfection Stage
a. sale by owner valid
b. sale by non-owner valid;
because ownership is necessary only transfer title to goods;
at perfection stage, no obligation on part of seller to transfer
ownership
law on estoppel further bolster it: title passes by operation
IMPORTANT CONSIDERATIONS
1. Negotiation gives better right than assignment
of law to grantee when person who is not owner of goods
sold delivers it and later on acquires title thereto
NEGOTIATION
ASSIGNMENT
since valid, action to annul is improper; there is perfected
transferor/holder acquires title to goods
acquires title to goods against transferor
bailee has direct obligation to holder as if acquires right to notify bailee so thatcontract
he
Stage
directly dealt with him
acquires obligation of bailee toConsummation
hold
goods for him
Contract of sale is valid because it has passed perfected
2. Assignee takes document with defects of the assignor
stage, despite:
3.
Obligation of bailee bailee is immediately bound to the
a. seller is not owner
document
b. seller has no authority to sell
What is void is the transfer of title/ ownership did not pass
WARRANTIES ON NEGOTIATION/ASSIGNMENT THE SAME
Effect: buyer acquired no better right than transferor
1. the document is genuine
Legal effect: CAVEAT EMPTOR BUYER BEWARE
2. he has legal right to negotiate or transfer it
a. co-owner sells whole property prior to partition sale is
3. he has knowledge of no fact which would impair the validity or
void as to his spiritual share
worth of the document
b. co-owner sells definite portion to partition sale is void
4. he has right to transfer title to goods and goods are
as to other co-owner but valid as to his spiritual share
merchantable/fit
Exception:
a. owner by his conduct is precluded from denying sellers
RULES OF LEVY/GARNISHMENT OF GOODS COVERED BY DOCUMENTS OF TITLE
authority (ESTOPPEL)
1. Non negotiable
b. contrary is provided for in recording laws (pd 1529)
Notification is operative act to transfer title/possession of
c. sale is made under statutory power of sale or under a
goods in favor assignee
court of competent jurisdiction
Before notification can be garnished but not when there is
d. sale is made under merchants store in accordance with
notification already
code of commerce & special laws
2. Negotiable
Can not be levied or garnished when docs already with
2. SALE BY SELLER WITH VOIDABLE TITLE
purchaser in good faith, unless:
Perfection Stage
a. Document is first surrendered
Valid sale buyer acquires title of goods
b. Document is pounded by court
Consummation Stage
c. Negotiation is enjoined
Valid sale if title has not yet been avoided buyer buys
goods under following condition:

S A L E S 11
a. in good faith
b. for value
c. without notice of sellers defect of title
TITLE AS TO MOVABLE PROPERTIES
Rule: POSSESSION IS EQUIVALENT TO TITLE

Requisites:
a. Possession of a movable
b. In good faith
Exception:
a. Owner lost movable owner can recover w/o reimbursing
price
b. Owner is unlawfully deprived owner can recover w/o
reimbursing price
Exception to Exception:
a. movable is bought at public sale owner can only recover
after reimbursing price
b. in good faith & for value
CHAPTER 9: LOSS, DETERIORATION, FRUITS & OTHER
BENEFITS
CIVIL LAW
No valid contract
subject matter;

involving

generic

To have a valid contract of sale, subject

matter must be determinate (law on loss,
deterioration, fruits, applies only to
determine subject matter)
Not a title but a mode
Perfection of contract of sale which is not

MEMORY AID

Res perit domino

Contract is merely inefficacious because loss of the subject
matter does not affect the validity of the sale
Seller cannot anymore comply with obligation so buyer
cannot anymore be compelled
3. After Perfection but before delivery
a. Loss confused state
2 views:
Paras: BUYER
Tolentino: SELLER
b. Deterioration & fruits - Buyer bears loss
4. After delivery
Res perit domino
Owner is buyer so buyer bears risk of loss
Delivery extinguish ownership vis-a-vis the seller & creates
a new one in favor of the buyer
CHAPTER 10: REMEDIES OF PARTIES FOR BREACH OF
CONTRACT OF SALE

SUBJECT MATTER: MOVABLES (IN GENERAL)

REMEDIES OF UNPAID SELLER
COMMON LAW
Any man may not take law in his own hands, must seek remedy
Perfection of K of sale which through
is not courts
conditional
covers
good
that
are
Exception:
determinable
1. DOCTRINE OF SELF HELP
Perfection is the mode which transfers
2. SPECIAL REMEDIES
ownership to buyer;
Requisites:
1. Subject matter goods
2. Seller is unpaid not completely paid or received negotiable
Tradition is merely a means to perform
instrument under a condition & condition has been breached
obligation
by reason of dishonor
Res perit domino; owner bears risk of loss
3. Physical possession is with seller

Conditional include goods which are not

deliverable; transfers risk to buyer
WHO BEARS RISK OF LOSS/DETERIORATION/FRUITS
1. Before perfection
Res perit domino
Owner is seller so seller bears risk of loss
2. At Perfection

1. possessory lien
2. stoppage in transitu
3. special right of re-sale
rights
4. special right to rescind

Can only be exercised when 2 prior

have been exercised

POSSESSORY LIEN
Seller not bound to deliver if buyer has no paid him the price

S A L E S 12

MEMORY AID
Right to retain; cannot be availed when seller does not have
custody
Exercisable only in following circumstances:
a. goods sold without stipulation as to credit
b. goods sold on credit but term of credit has expired
c. buyer becomes insolvent
When part of goods delivered, may still exercise right on goods
undelivered
Instances when possessory lien lost:
a. seller delivers goods to carrier for transmission to buyer
without reserving ownership in goods or right to possess
them
b. buyer or agent lawfully obtains possession of goods
c. waiver
loses lien when he parts with goods (still has stoppage in
transitu)
notice by seller to buyer not essential

STOPPAGE IN TRANSITU
Requisites:
1. Goods are in transit
When goods are in transit
From the time goods are delivered to carrier for
purpose of transmission to buyer
Goods rejected by buyer & carrier continues to
possess them
When goods no longer in transit
Reached point of destination
Before reaching destination, buyer met seller along
the way
Goods are supposed to have been delivered to buyer
but carrier refused
2. Shown by seller that buyer is insolvent ( failure to pay when
debts come due )
How is right exercised:
a. Obtain actual possession of goods
b. Give notice of claim to carrier / bailee in possession
thereof
Notice by seller to buyer is not required; notice to carrier
is essential
SPECIAL RIGHT

TO

RESELL

THE

GOODS

Requisites:
1. goods are perishable
2. stipulated the right of resale in case buyer defaults in
payment
3. buyer in default for unreasonable time
notice by seller to buyer not essential
why special there are things which seller cannot do in ordinary
sale:
1. ownership is with buyer but seller can sell goods
2. title accorded to buyer is destroyed even without court
intervention

SPECIAL RIGHT TO RESCIND

why special ownership of goods already with buyer but seller
may still rescind; ownership is destroyed even without court
intervention but in ordinary sale, need to go to court to destroy
transfer of ownership
Requisites:
1. Expressly stipulated
2. Buyer is in default for unreasonable time
Notice needed to be given by seller to buyer
REMEDIES OF BUYER
When Seller fails to deliver, buyer may seek SPECIFIC
PERFORMANCE WITHOUT GIVING SELLER OPTION TO RETAIN
GOODS ON PAYMENT OF DAMAGES
SALE OF MOVABLES ON INSTALLMENT
REMEDIES OF UNPAID SELLER (1484)
1. Exact fulfillment should the buyer fail to pay
2. Cancel the sale if buyer fails to pay 2 or more installments
3. Foreclose on chattel mortgage if buyer fails to pay 2 or more
installments
If buyer chooses foreclosure, no further action against
buyer to recover any unpaid balance of the price
When is law is applicable: Sale on movables by installment
Sale on installment: payment by several partial payments in
small amount
Rationale of the law: Buyer is lulled into thinking that he
could afford because of small amounts per installment & at
the same time remedy abuse of commercial houses
Nature of remedies: alternative & not cumulative

S A L E S 13

MEMORY AID
Coverage: sale & financing transaction & contracts of lease
with option to purchase
Action : Judicial & Extrajudicial

SPECIFIC PERFORMANCE
If already chose specific performance, cannot anymore choose
other remedies
Except: after choosing, it has become impossible, rescission
may be pursued
RESCISSION
When chosen, there is correlative obligation to restitute
But stipulation that installments paid are forfeited are valid if
not unconscionable
Deemed chosen when:
a. Notice of rescission is sent
b. Takes possession of subject matter of sale
c. Files action for rescission
Barring effect on recovery of balance
FORECLOSURE
Barring effect on recover of balance
Extent of barring effect: purchase price
Exception: mortgagor refuses to deliver property to effect
foreclosure; expenses incurred in attorneys fees, etc.
IMMOVABLES (IN GENERAL)
REMEDIES OF SELLER
1. Anticipatory breach
Seller has reasonable grounds to fear loss of immovable sold
& its price sue for RESCISSION
2. Non payment of price
RESCISSION
REMEDIES OF BUYER
1. Disturbed in possession or with reasonable grounds to fear
disturbance
SUSPEND PAYMENT
2. In case of subdivision or condo projects
If real estate developer fails to comply with obligation
according to approved plan:
a) RESCIND

b) SUSPEND PAYMENT UNTIL SELLER COMPLIES

IMMOVABLES (BY INSTALLMENT)

1592 Applies only to contract of sale
Maceda Law applies to COS & CTS & Financing
MACEDA LAW
Coverage: REAL ESTATE defines space v CONDO not defined
space (w/ common areas)
1. contract of sale
2. contract to sell
3. financing transactions
Excluded:
1. industrial
2. commercial
3. sale to tenants under agrarian laws
RIGHTS GRANTED TO BUYERS:
1. Buyer paid at least 2 years installment
a. Pay without interest the balance within grace period of 1
month for every year of installment payment
Grace to be exercised once every 5 years
b. When no payment - cancelled; buyer entitled to 50% of
what he has paid + 5% for every year exceeding 90% of
payments made
Cancellation to be effected 30 days from notice &
upon payment of cash surrender value
2. Buyer paid lees than 2 years installment
a. Grace period is 60 days
b. Cancellation if failure to pay within 60 days grace
c. 30 days notice before final cancellation
buyer can still pay within the 30 days period
with interest
Purpose of law : Protect buyers in installment against
oppressive conditions
Notice needed waiver thereof id oppressive
Apply to contracts even before law was enacted
Stipulation to contrary is void
Other rights:
a. Sell rights to another
b. Reinstate contract by updating within 30 days before
cancellation
c. Deed of Sale to be done by notarial act

S A L E S 14
d. To pay full installment in advance the balance of price
anytime without interest
e. Have full payment annotated in certificate of title
CHAPTER 11: REMEDY OF RESCISSION IN CONTRACTS
COVERING IMMOVABLES
RESCISSION (RESOLUTION) 1191
legal basis is substantial breach
principal remedy, retaliatory vs. unjust party

However, if party to the sales contract has promised that the

condition should happen or be performed, the non-performance
of which may be treated by parties as breach

CONDITION
Purports to existence of obligation
Obligation must be stipulated to form
RESCISSION 1385
part of the obligation
legal basis is lesion (rescissible
Maycontract)
attach itself to obligation of seller to
subsidiary remedy cannot
be possession
instituted & transfer
deliver
except when other remedies exhausted
mutual restitution

mutual restitution
Nature: Judicial
Extra judicial Rescission
allowed if stipulated; burden to sue shifts to party
who do not like rescission
court still has final say as to propriety of rescission
Forfeiture of amounts valid being in nature of penal clause
CONTRACT OF SALE
Governed by genus SALE
Ownership passes because of tradition
Non-payment is resolutory condition which
may be basis of breach
Perfection
gives
rise
to
reciprocal
demandable obligation

MEMORY AID

WARRANTY
Purports to performance of oblig
Need not be stipulated; may fo
obligation by provision of law
Relates to the subject matter
obligation of the seller as to t
matter of the sale

B. EXPRESS WARRANTIES ( REQUISITES )

1. it must be an affirmation of fact or any promise by seller
relating to the subject matter of sale
2. natural tendency of affirmation or promise is to induce
buyer to purchase subject matter
3. buyer purchases the subject matter relying thereon
when breached, seller is liable for damages

CONTRACT TO SELL
Governed by genus SALE C. IMPLIED WARRANTIES deemed included in all contracts of sale
whether parties are
actually
Ownership passes upon full payment
aware
or
not
aware
or
whether
they
were
intended
or
not; by
Non payment is suspensive non-payment
operation
of
law
extinguishes contract to sell
1. conditional
warranty that seller has a right to sell
Perfection gives rise to reciprocal
refers to consummation stage since in consummation
obligation
stage, it is where ownership is transferred by tradition

not applicable to sheriff, auctioneer, mortgagee, pledgee

CONTRACT OF SALE RESCISSION IS APPLICABLE
2.
warranty
against eviction
CONTRACT TO SELL RESCISSION NOT APPLICABLE

unless
contrary provision appears in contract
Non payment of purchase price would automatically cancel

when
ownership
is transferred, buyer shall enjoy the
even without further action for rescission
legal
and
peaceful
possession of the thing
Except: If subject matter is residential lots, law on rescission
R
EQUISITES OF BREACH OF WARRANTY AGAINST EVICTION:
applies when there is substantial breach
1. buyer is evicted in whole or in part from the
subject matter of sale
CHAPTER 12:
CONDITION & WARRANTIES
2. there is a final judgement
3. basis of eviction is a right prior to sale or an act
A. CONDITION
imputable to vendor
When a contract contains a condition, the non-happening of
4. seller has been summoned in he suit for eviction
which would not constitute a breach but extinguishes the
at the instance of buyer; or made 3 rd party
obligation
defendant through 3rd party complaint brought by
buyer

S A L E S 15

MEMORY AID
no appeal needed nor a need to resist eviction for right
to accrue; enough that aforementioned requisites are
complied with
warranty cannot be enforced until aforementioned
requisites concur
applies to judicial sale; judgement debtor responsible for
eviction unless otherwise decreed in judgement
vendor not liable for eviction if adverse possession had
been commenced before sale but prescriptive period is
completed after transfer

LIABILITY OF SELLER: (eviction w/c caused buyer to lose whole

subject matter)
1. value of thing at time of eviction ( whether or not -/+ of
price of sale )
2. value of income of fruits
3. cost of suit which caused the eviction
4. expenses of contract if buyer paid for them
5. damages & interests and ornamental expenses if sale
was made in bad faith
RIGHTS

OF BUYER WHEN DEPRIVED OF ONLY PART OF THE SUBJECT

MATTER BUT WOULD NOT HAVE BOUGHT SUCH PART IF NOT IN RELATION
FOR THE WHOLE:

1. rescission
2. mutual restitution

3. WARRANTY AGAINST ENCUMBRANCES (non- apparent) requisites:

a. immovable sold is encumbered with non apparent
burden or servitude not mentioned in the agreement
b. nature of non apparent servitude or burden is such that
it must be presumed that the buyer would not have
acquired it had he been aware thereof
when breach of warranty exist: buyer may ask for
rescission or indemnity
warranty not applicable when non apparent burden or
servitude is recorded in the Registry of Property unless
there is expressed warranty that the thing is free from all
burdens & encumbrances
4. WARRANTY AGAINST HIDDEN DEFECTS
SELLER does not warrant patent defect; caveat emptor

Except when hidden

a. subject matter may be movable or immovable
b. nature of hidden defect is such that it should render
the subject matter unfit for the use of which it was
intended or should diminish its fitness
c. had the buyer been aware, he would not have
acquired it or would have given a lower price
when defect is visible or even if visible if the buyer is an
expert by reason of his trade or profession, seller is not
liable
obligation of seller for breach depends on whether he
has knowledge of such defect or not
a. seller is aware seller should return price & refund
expenses of contract with damages
b. seller is not aware - seller should return price and
interest & refund expenses ( no damages )
buyer may elect between withdrawing from contract or
demanding proportionate reduction of price with
damages in either case
applicable to judicial sale except judgement debtor not
liable for damages
action to prescribe 6 months from delivery of subject
matter

5. DEFECTS ON ANIMALS
even in the case of professional inspection but hidden defect
is of such nature that expert knowledge is not sufficient defect shall be considered as REDHIBITORY
if vet fails to discover through ignorance or bad faith he is
liable for damages
a. sale of animals on teams ( 2 or more )
when only one is defective, only one is redhibited &
not the others
exception:
when it appears that purchase of team
will not be done without the defective one
apply to sale of other things
b. sale of animals at fair or public auction
no warranty against hidden defects
c. sale of animals with contagious disease is void
d. sale of unit of animal

S A L E S 16

MEMORY AID
void if use / service for which they are acquired has
been stated in the contract and they are found to be
unfit thereof
prescription of action:
40 days from date of
delivery to buyer
if sale is rescinded, animals to be returned in same
condition when they are acquired; buyer shall answer
for injury / loss due to his fault
buyer may elect between withdrawing from sale or
demanding proportionate reduction of price with
damages in either case

D. SPECIFIC IMPLIED WARRANTIES IN THE SALE OF GOODS

1. Warranty as to fitness & quality; requisites:
a. buyer makes known to seller the particular purpose for
which goods are acquired and it appears that the buyer
relied on the sellers skill or judgement
b. goods are bought by description from seller who deals in
goods of that description
no warranty unless there is stipulation in case of sale of
specified article under its patent or trade name
measure of damage: difference between value of goods
at time of delivery and value they would have had if they
had answered to the warranty
2. Sale of Goods by sample
If seller is a dealer in goods of that kind, there is an
implied warranty that the goods shall be free from defect
rendering them unmerchantable which would not be
apparent on reasonable examination of the sample
E. EFFECTS OF WAIVER
Parties may increase or diminish implied warranty against
eviction; but effect depends on good faith or bad faith on
the part of the seller.
1. seller in bad faith & there is waiver against eviction null
& void
2. buyer without knowledge of a particular risk made
general renunciation of warranty not waiver but merely
limits liability of seller in case of eviction (pay value of
subject matter at time of eviction)

F.

3. buyer with knowledge of risk of eviction assumed its

consequences & made a waiver vendor not liable
(applicable only to waiver of warranty against eviction)
when goods delivered to buyer he cannot rescind sale
if he knew of the breach of warranty when he accepted
goods without protest
if he fails to return or offer to return goods to seller in
substantially as good condition as they were at time
ownership was transferred
when goods deteriorated, buyer can still return them in that
condition if such is due to breach or warranty

BUYERS OPTION IN CASE OF BREACH OF WARRANTY

1.
Accept goods & set up breach of warranty by way of
recoupment in diminution or extinction or the price.
2.
Accept goods & maintain action against seller for
damages
3.
Refuse to Accept goods & maintain action against
seller for damages
4.
Rescind contract of sale & refuse to receive
goods/return them when already received.

CHAPTER 13: EXTINGUISHMENT

GROUNDS:
1. same grounds whereby obligations in general are extinguished:
a. payment or performance
b. loss of the subject matter
c. condonation or remission
d. confusion or merger of rights or creditor and debtor
e. compensation
f. novation
g. annulment
h. rescission
i. fulfillment of a resolutory condition
j. prescription
2. conventional redemption only applies to contract of sale
3. legal redemption only applies to contract of sale
CONVENTIONAL REDEMPTION
seller reserved the right to repurchase thing sold
coupled with obligation to return price of the sale, expensed of
contract & other legitimate payments and the necessary &
useful expenses made on the thing sold

S A L E S 17

MEMORY AID
right must be recognized in the deed of sale; must be the same
contract

OPTION TO PURCHASE
right to repurchase the thing sold granted to the vendor in a
separate instrument from the deed of sale
EQUITABLE MORTGAGE
a contract with right to repurchase is equitable mortgage if the
following requisites concur:
1. price of sale with right to repurchase is unusually
inadequate
2. seller remains in possession as a lessee or otherwise
3. upon / after expiration of right to repurchase, another
instrument extending the period of redemption is executed
4. buyer retains for himself a part of the purchase price
5. seller binds himself to pay taxes on thing sold
6. real intention of parties is to secure the payment of a debt
or performance of other obligation
IN CASE OF DOUBT IN DETERMINING WHETHER IT IS
EQUITABLE MORTGAGE OR SALE A RETRO (WITH RIGHT OF
REPURCHASE IT SHALL BE CONSTRUED AS EQUITABLE
MORTGAGE)
WHAT TO LOOK FOR IN DETERMINING NATURE OF CONTRACT
1. language of the contract
2. conduct of parties to reveal real intent
REMEDY

AVAILABLE TO VENDOR:

ask for reformation of contract

RATIONALE BEHIND PROVISION ON EQUITABLE MORTGAGE:

1. Circumvention of usury law
2. Circumvention of prohibition against pactum commissorium
creditor cannot appropriate the things given by way of pledge
or mortgage; remedy here is foreclosure
real intention of parties is that the pretended purchase price is
money loaned & to secure payment of the loan, sale with pacto
de retro is drawn up
PERIOD OF REDEMPTION
1. No period agreed upon 4 years from date of contract

2. When there is agreement should no exceed 10 years; if it

exceeded, valid only for the first 10 years.
3. When period to redeem has expired & there has been a
previous suit on the nature of the contract seller shill has 30
days from final judgement on the basis that contract was a sale
with pacto de retro: rationale: no redemption due to erroneous
belief that it is equitable mortgage which can be extinguished
by paying the loan.
4. When period has expired & seller allowed the period of
redemption to expire seller is at fault for not having exercised
his rights so should not be granted a new period
EFFECT WHEN THERE IS NO REDEMPTION MADE:
1. jurisprudence before the NCC: buyer a retro automatically
acquires full ownership
2. under present art 1607: there must be3 judicial order before
ownership of real property is consolidate in the buyer a retro
HOW IS REDEMPTION EFFECTED:
1. Seller a retro must return first pay the following:
a.
the price of the thing sold
b.
expensed of the contract and other legitimate
payments made by reason of the sale
c.
necessary and useful expensed made on the thing
sold
2. Valid tender of payment is sufficient
3. Mere sending of notice without valid tender is insufficient
4. Failure to pay useful & unnecessary expenses entitled vendee
to retain land unless actual reimbursement is made
IN CASE OF MULTI-PARTIES
1. When an undivided thing is old because co-owners cannot
agree that it be allotted to on of them vendee a retro my
compel the vendor to redeem the whole thing
2. When an undivided thing is sold by co-owners / co-heirs,
vendors a retro may only exercise his right over his respective
share; vendee a retro may demand that they must come to an
agreement first and may not be compelled to consent to a
partial redemption
3. When rights for co-owners over an undivided thins is sold as
regards to their own share vendee retro cannot compel one to
redeem the whole property

S A L E S 18
4. Should one of the co-heirs/co-owners succeed in redeeming the
property such vendor a retro shall be considered as trustee
with respect to the share of the other co-owners/co-heirs.
FRUITS
1. what controls is the stipulation between parties as regards the
fruits; if none
2. at time of execution of the sale a retro there should be visible or
growing fruits there shall be no pro-rating at time of
redemption of no indemnity was paid by the vendee a retro
3. at time of execution sale a retro there should be no fruits but
there are fruits at time of redemption pro-rated between
vendor a retro & vendee a retro giving the vendee a retro a part
corresponding to the time he possessed the land.
LEGAL REDEMPTION

right to be subrogated upon the same terms and conditions

stipulated in the contract, in the place of one who acquires the
thing by purchase or by dation in payment or by other
transaction whereby ownership is transmitted by onerous title.
1. among co-heirs
any of heirs sells hereditary right to stranger before partition
any of the co-heirs may be subrogated to the rights of the
purchaser by redeeming said hereditary right: reimburse
buyer of the price of the sale
co-heirs has 1 month from receipt of notice in writing
2. among co-owners
any or all of co-owners sells their shared to 3rd person
any co-owner may exercise right of redemption by paying
reasonable price of property to the buyer
if 2 or more co-owners desire to exercise right of
redemption, they may only do so in proportion to the share
they may respectively have in the thing owned in common

MEMORY AID
particular object
3. among adjoining owners
a. rural land
where piece of rural land has an area not exceeding 1
hectare, adjoining owner has right to redeem unless
grantee does not own a rural land
if 2 or more adjacent lot owners desire to exercise right
to redeem, owner of adjoining lot with smaller area shall
be preferred
if 2 or more adjacent lit owners desire to exercise right to
redeem & both have same lot area, one who first
requested shall be granted
b. urban land
when piece of land is small & cannot be used for any
practical purpose & brought merely for speculation,
owner of adjoining land can redeem
2 or more owners of adjoining lot desire to exercise right
to redeem, owner whose intention towards use of land
shall be preferred.
c. sale of credit litigation
when a credit or other incorporeal right in litigation is
sold, debtor shall have a right to extinguish it by
reimbursing the assignee for the price the latter paid
therefor plus judicial costs, interest
debtor may exercise right within 30 days from assignee
demands payment from him
WHEN PERIOD OF REDEMPTION BEGINS TO RUN
1. right of legal pre-emption of redemption shall be exercised
within 30 days from notice by the buyer
2. deed of sale not to be recorded in RD unless accompanied by
affidavit that buyer has given notice to redemptioners
3. when there is actual knowledge, no need to give written notice;
period of redemption begins to run from actual knowledge

DISTINCTION BETWEEN RIGHT OF REDEMPTION OF CO-HEIRS FROM COOWNERS

OTHER INSTANCES WHEN RIGHT OF LEGAL REDEMPTION IS GRANTED
CO-HEIRS
CO-OWNERS
1. Redemption of homesteads
Heir may redeem for himself alone the Co-owner may redeem property but
even
Public Land Act
hereditary right sold by a co-heir
if uses his own funds, redemption inures
Land acquired under free patent homestead
to the benefit of other co-owners Subject to repurchase by wife, legal heirs within 5 years
Sale of hereditary right (1088) over no Sale of interest in particular property from date of conveyance

S A L E S 19

MEMORY AID
Granted by law, need not be stipulated

2. Redemption in tax sales

in case of tax delinquency/failure to pay tax assessments,
property is foreclosed
delinquent payer has 1 year to redeem by paying to the
revenue District Officer the amount of tax delinquencies, &
interest or purchase price.
3. Redemption by judgement debtor
1 year to redeem by paying purchaser at public auction with
interest
4. Redemption in extrajudicial foreclosure
1 year from date of sale and registration
5. Redemption in judicial foreclosure of mortgage
no right to redeem is granted to debtor mortgagor
except when mortgagee is bank of a banking institution
90 days after finality of judgement
CHAPTER 14: ASSIGNMENT

Sale of credits & other incorporeal things

Technical term but basically a sale

WHAT MAKES ASSIGNMENT DIFFERENT FROM SPECIES SALE:

ASSIGNMENT
Subject matter
Intangibles
Form
Consensual
Binding effect to 3rd Recorded
in
registry
of
persons
property

3. debtor has consented to assignment cannot set up

compensation unless assignor was notified that he reserved his
right to the compensation
4. debtor has knowledge but no consent - compensation may still
be set up
TRANSFER OF OWNERSHIP
by tradition & not by perfection
execution of public instrument because intangibles cannot be
physically transferred
ACCESSORIES & ACCESSIONS
includes all accessory rights such as guaranty, mortgage,
pledge or preference

WARRANTIES
1. against hidden defect - N/A because intangibles has no physical
existence
2. existence & legality of credit - there is warranty except when
what is sold is doubtful account
3. solvency of debtor - no warranty, unless
a. there is stipulation
b. insolvency was prior to assignment & of common knowledge
shall only last for 1 year
4. one who assigns inheritance right w/o enumerating rights shall
be answerable for his character as an heir
5. one who sells certain rights for a lump sum, shall be answerable
for legitimacy of the whole in general but not for each of the
SALE
various parts

Tangibles
Consensual
BREACH OF WARRANTY
No recording needed
such
1. to
if in
good faith - expenses of the contract & other legitimate
effect
payments made by reason of the assessment
2. if in bad faith - expenses of contract & other legitimate
payments plus useful & necessary expenses
EFFECT OF ASSIGNMENT
1. lack of knowledge or consent of debtor not essential for validity
ASSIGNMENT OF CREDIT OR INCORPOREAL RIGHT IN LITIGATION
but has legal effect
speculative
2. assignment of rights made w/o knowledge of debtor debtor
may set up against assignee the compensation w/c would
law would rather benefit the debtor of such credits rather than
pertain to him against assignor of all credits prior to assignment
the one who merely speculates for profit
and later ones until he had knowledge of the assignment
when credit or incorporeal right in litigation is assigned or sold,
debtor has a right to extinguish it by reimbursing the assignee
for the price the buyer paid plus interest

S A L E S 20

MEMORY AID
right to redeem to be exercised within 30 days from demand by
assignee for payment

RIGHT TO REDEEM BY DEBTOR NOT AVAILABLE IN THE FOLLOWING INSTANCES

(NOT CONSIDERED SPECULATIVE)
1. assignment of credit / incorporeal right to co-heir or co-worker
2. assignment to creditor in payment for his credit
3. assignment to possessor of tenement or piece of land which is
subject to the right in litigation assigned
CHAPTER 15:

BULK SALES LAW

Register sworn statement with DTI

Include or omit names of creditors &
correct amount due in the statement
Sale for no consideration

OF

NON-COMPLIANCE
ON TRANSACTION

FAILURE TO:
Prepare & deliver sworn listing of
creditors
Apply proceeds pro-rata to listed
creditors
Make advance written disclosure of
transactions to creditors

No Crimin
Criminal L

Void

Criminal L

ANTI-DUMMY LAW
Penalizes Filipinos who permit aliens to use them as nominees
or dummies to enjoy privileges reserved only for Filipinos
Management, operation as officers, employees or laborers
Control or non-control position

Protect creditor of merchant stored

3 types of transactions:
1. Sale of goods other than in ordinary course of business
2. Sale of business
3. Sale of fixtures & equipments
Should cover only merchants because creditors cannot get
adequate security because goods are sold ordinarily in course of
business
Not covered:
1. with waiver of creditor of seller
2. receiver, assignee in insolvency proceeding
Duty of seller to perform the following when transaction is
within the coverage of the law
1. make sworn statement of listing of creditors
2. delivery of sworn statement to buyer
3. apply the proceeds pro-data to claims of creditors shown in
verified statement
4. written advance disclosure to creditors

EFFECTS

Not void
Void

ON SELLER

Fraudulent & void

Criminal Liability

Fraudulent & void

Criminal Liability

Not void

No Criminal Liability